Turkey’s central bank to cut rates amid virus concerns
Turkey’s central bank will revise its monthly interest rate down to nearly 1% as a result of the COVID-19 pandemic. This will enable Turkish citizens to borrow and spend more in an attempt to shield the Middle East’s largest economy against the recessive effects of the pandemic.
Aside from credit easing, Ankara announced a $15 billion support package of tax cuts and payment deferrals as a further safeguard against economic downturn. This comes at a crucial time for the 15 million employees in the hardest-hit tourism industry, many of whom can expect to be laid off in the coming weeks.
While Ankara claims that the Turkish economy is dynamic and robust enough to weather the storm, the numbers paint a different picture. The country is still recovering from a 2018 currency crisis, and the lira’s ongoing fragility is evident given that the value of the Turkish currency has fallen 10% this year.
Turkey’s economy will undoubtedly shrink, as foreign investors have already pulled out over $700 million from the domestic currency bond market. Expect investors to redirect capital to the most stable currency markets, such as the dollar, making Turkey’s economic sustainability ever more difficult. On top of that, Turkey’s mounting debt will only become more burdensome as the lira weakens, and spell trouble for its ability to recover along the same lines as other Western economies in the long term.
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